Derivatives

Correlation Swap

March 25, 2021
Derivatives

Cash-Settled Swap

March 25, 2021

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An option that is settled for cash, instead of its underlying being actually delivered following exercise of the option. The cash amount of settlement is equal to the difference between the option’s strike price and the spot price of the underlying at the time of exercise.

Cash settlement is possible and allowable for options on many types of underlying, especially: currency options, bond options, stock index options, basket options, stock options, etc.

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